Michael Charlton shares his views on how health systems can deal with and benefit from disruptors.
If you’re a leader in charge of a healthcare organization, there’s a good chance you’ve been thinking a lot recently about what disruption in the industry will mean for you.
Whether it’s bad or good is really in the eye of the beholder if you’re a provider. For Michael Charlton, new CEO of AtlantiCare Health System, disruptors give hospitals “guidance on what the consumer wants,” he recently told HealthLeaders.
At the same time, Charlton also recognizes that health systems have the human capital and infrastructure, which will always give them the edge on the inpatient side of the business. Still, providers can’t suffer from complacency and have to continue finding ways to make care convenient for patients.
Watch Charlton opine on the state of disruption in healthcare in the video below.
The health systems decided not to fight regulators in court.
Chalk up another victory for the Federal Trade Commission and another defeat for hospital dealmaking.
A court ruling wasn’t even necessary this time around as John Muir Health and Tenet Healthcare called off their agreement for the former to acquire San Ramon Regional Medical Center due to the FTC’s motion to block the deal.
The health systems said in a statement that they chose to not challenge the agency in court because of the length of time and costs a legal battle would require. While the FTC may have been able to persuade a court that the deal would have eliminated competition and led to higher prices, the agency’s ability to kill a deal without a legal decision by applying pressure alone is discouraging for hospital M&A.
The agreement would have given John Muir, which already held a 49% stake in San Ramon Regional since 2013, the remaining 51% from Tenet for $142.5 million.
After the health systems called off the deal, the FTC moved to dismiss their case challenging the transaction.
“The FTC has scored another major health care win in less than a month, delivering patients in California continued access to quality, affordable health care services. John Muir’s anticompetitive hospital takeover would have driven up health care costs for critical services like heart surgery, spinal surgery, and maternity care,” Bureau of Competition director Henry Liu said in a statement. “It also threatened to eliminate improvements in care driven by competition, which directly benefit patients.
“Now that this transaction is terminated, John Muir and Tenet’s San Ramon Regional Medical Center can continue competing head-to-head to offer high-quality care at the best prices for Californians in the I-680 corridor.”
The FTC and the Justice Department also jointly issued the 2023 merger guidelines, which describe what the agencies consider when reviewing mergers and acquisitions.
The new guidelines modify the draft merger guidelines that were released in July and “emphasize the dynamic and complex nature of competition ranging from price competition to competition for the terms and conditions of employment, to platform competition.”
The event brought shared viewpoints among emerging leaders to the forefront.
Some of healthcare’s future leaders convened at the HealthLeaders UpNext Exchange in Austin, Texas to share their perspective on how the industry can best adapt in the face of its many challenges.
The overarching sentiment at the two-day event, which featured 18 leaders from various organizations and in different positions, was that the approach to solving healthcare’s biggest issues must change to keep up with healthcare itself being ever-changing.
Here are three common ideas we heard at the Exchange:
Get back to basics
As much as the current climate requires some new solutions, the leaders agreed that a “back to basics” approach can go a long way to shoring up areas that don’t need to be reinvented.
In a post-COVID world, organizations need to get their muscle memory back—things that were automatic before are now forgotten or suffering from complacency.
Manging labor is one of those areas. After being infused with money by the government during the pandemic, hospitals have relied too heavily on labor cost structures that are now creating problems due to margins being thin. Contract labor, for example, no longer has the same viability as it did when patient volume was through the roof.
The pandemic taught valuable lessons, but as circumstances return closer to a pre-COVID world, organizations must get back to what worked well in the past—not just strategies, but also mindsets.
Embrace technology
It’s almost impossible right now to operate in healthcare—or any industry for that matter—and not be looking for ways to integrate technology to improve workflows and outcomes.
However, many of the leaders at the Exchange expressed that organizations are perhaps still too hesitant on fully committing. Hospitals may be investing in technology but if it’s in a tepid way and without choosing a defined direction, they’ll likely not realize the true returns on their investment. That could cause organizations to be stuck in an investment loop as new technology continues to come along.
Instead, don’t be afraid to play out the string and see just what your investment gets you. Even if it doesn’t work out, trusting the process will allow you to make more informed decisions with future investments.
The leaders recognized that something like AI can significantly ease the load on an organization’s workforce by reducing time and burden associated with administrative tasks. That type of technology can’t be optimized to supplement the workforce though if hospitals don’t educate their staff and have the right people in place to manage it. All that takes a buy-in from organizations—something they have almost no choice but to do going forward.
Be willing to try and fail
Whether it’s investing in technology or implementing any other strategy, the leaders were adamant that organizations must be ready and willing to try new things—and not be scared off by failure.
The standard three to five-year plan isn’t tenable anymore, not with C-suites in constant flux and experiencing rapid turnover. The quicker organizations can roll out solutions, the quicker they can get hard data back and learn what is working and what isn’t. Iterate, don’t stagnate.
That type of culture needs to be built, however, and it starts with the biggest voices in the leadership room. The leaders at the Exchange may get that opportunity for themselves soon, but for now they’re eager to contribute however they can to taking healthcare in a new direction.
The 2024 HealthLeaders UpNext Exchange is sponsored by Collette Health.
New data reveals the industry is experiencing the third-most reductions in 2023.
Jobs are being cut at the highest rate since the height of the COVID-19 pandemic and healthcare is one of the sectors suffering the most, according to a report by Challenger, Gray & Christmas.
Healthcare/products, including hospitals and manufacturers, announced 57,758 cuts from January to November, marking a 99% increase over the 29,031 jobs cut during the same period in 2022. The reductions are coming as hospital and health system leaders attempt to scale back on labor costs and find new ways to solve workforce challenges.
The only industries that have cut more jobs than healthcare this year are technology, which slashed 163,562 jobs, and retailers, which scaled back 78,730 jobs.
Across all sectors, companies announced plans to cut 686,860 jobs, a significant jump from the 320,173 cuts over the same period last year for a 115% increase. It is the highest figure since January to November 2020, when 2,227,725 jobs were lost in large part due to the pandemic. Pre-COVID, this year's total is the highest since 2009, when 1,242,936 jobs were cut during the Great Recession.
For healthcare, November did bring an upswing in job growth as the industry added 77,000 jobs, well above the 54,000 average monthly again over the past 12 months, according to the Bureau of Labor Statistics. Within that total, ambulatory care services accounted for 36,000 new jobs, hospitals accounted for 24,000, and nursing and residential care accounted for 17,000.
Keeping the workforce strong is arguably the primary focus for decision-makers right now, but labor expenses are making that difficult to achieve. Heading into 2024, CEOs and CFOs will continue to have costs on their mind as they shape their approach to retain and supplement their workers.
Whether it's investing in technology to bring more automation into operations, or strategically utilizing attrition to make the workforce leaner and more efficient, leaders must weigh where and how to slim down.
Dr. Boris Pasche is taking advantage of his past experience in his role.
New Karmanos Cancer Institute president and CEO Dr. Boris Pasche is less than six months into his tenure, but his clinical background is both easing his transition and paying off for the organization.
Pasche recently joined the HealthLeaders Podcast and spoke about his experience wearing many hats, including physician, researcher, and cancer treatment inventor.
In the following video, Pasche explains how that background has benefited him as a CEO—particularly one in cancer care—by allowing him to tap into a large network of other physicians that he can work alongside or recruit, giving him a strong understanding of the landscape.
The divesture is one of several the health system pursued in 2023 to ease its finances.
Community Health Systems (CHS) was aggressive as a seller this past year in the face of financial turbulence.
The for-profit system's latest deal, a sale of three Florida hospitals to Tampa General Hospital for $294 million, closed earlier this month to give CHS additional resources as it attempts to claw out of the red in 2024.
In the transaction, 120-bed Bravera Health Brooksville in Brooksville, 128-bed Bravera Health Seven Rivers in Crystal River, and 124-bed Bravera Health Spring Hill go to Tampa General Hospital, along with their associated assets, physician clinic operations and outpatient services.
The move followed a string of sales by CHS in 2023. The system agreed to sell two North Carolina hospitals to Novant Health for $320 million in February before signing a deal to sell an El Dorado-based single hospital to South Arkansas Regional Hospital in April. CHS also completed a $92 million sale of a West Virginia hospital to Vandalia Health after agreeing to the transaction in January.
In the second-quarter earnings call with investors, CHS CEO Tim Hingtgen said the divestures "enable us to deliberately focus our resources in markets that we aim as most investable and that can produce greater growth and returns over the long term."
CHS will hope that by trimming down its portfolio and shifting its full focus onto key markets that it can turn around its margins heading into the new year.
The system's recent earnings report revealed it suffered net losses for the third-straight quarter, despite rising patient volume and efforts to bring down labor costs.
"Inflationary pressures continue to impact operating expenses and margins," Hingtgen said on the third-quarter earnings call. "While we remain highly confident in the potential of our overall portfolio, the growth in margin development opportunities in a small number of markets have been hindered in this rising cost environment. We are taking swift and necessary steps to mitigate these headwinds."
After signaling a desire to sell in 2023, CHS may not be done exploring opportunities entering the coming year.
The inaugural event is bringing together a diverse group of healthcare's finest in Austin, Texas.
The coming wave of healthcare leaders discussed the industry's foremost challenges and new approaches to tackling them at the first HealthLeaders UpNext Exchange.
Through day one at the two-day event in Austin, Texas, the 18 participating leaders shared their personal views and experiences dealing with the same pain points that are keeping CEOs, CFOs, and other c-suite executives up at night—but with a fresh outlook steadfast in its belief that the status quo is no longer enough.
The inaugural honorees consist of physicians, nurses, pharmacists, finance leaders, attorneys, and administrators representing organizations ranging from a 35-bed rural community hospital to a large regional health system with more than 80,000 employees.
Whereas other HealthLeaders Exchange events bring together leaders in the same role or discipline, the UpNext Exchange features a diverse group with voices in different areas of the industry, creating an environment rich with new thoughts and ideas.
Whether the topic was workforce, disruption, or technology, the leaders spent the first day stressing that the mindset for solving healthcare's biggest problems must evolve. In a post-COVID-19 world, the same strategies and way of thinking that may have worked in the past aren't necessarily the most effective now or going forward.
The pandemic has also put the entire industry on the defense or in crisis mode, which has hampered innovation. That reality forced the leaders to consider how they can get back to strategizing and revamping—while continuing to put out fires instead of waiting for them to dissipate.
Where and how technology fits into that was another major talking point, particularly in relation to the workforce. As the presence of AI and automation continues to grow, healthcare must find the most effective way to utilize that technology to supplement the workforce, not just replace it.
Stay tuned for more coverage of the UpNext Exchange, which will include ideas from day two in a full recap of the event.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Join us for the next HealthLeaders Exchange!To inquire about attending a HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The 2024 HealthLeaders UpNext Exchange is sponsored by Collette Health.
The move is a strong strategic fit, but whether it will pass antitrust scrutiny is unclear.
A significant merger could be in the works between Cigna and Humana that would combine the payers into a force large enough to challenge its biggest rivals.
News of a stock-and-cash deal that could be finalized by the end of this year was reported by the Wall Street Journal, setting up a potential antitrust showdown with regulators. While the lack of overlap between the two payers' insurance businesses makes it more of a vertical consolidation and increases the chances of the merger passing, the pharmacy benefit manager (PBM) aspect of the deal could be a major sticking point.
Though Cigna and Humana are among the largest insurers in the country, their respective of areas of focus differs. Humana's bread and butter is Medicare Advantage (MA), in which its membership and market share are second only to UnitedHealthcare's, whereas Cigna has a much smaller footprint in MA and was already reportedly considering shedding that part of its business. The MA goldmine has begun to dry up with the reimbursement model changing and star rating system methodology shifting, leading to lower bonus payments.
Humana, meanwhile, is withdrawing from the commercial market to turn its full attention to its core lines of Medicare and Medicaid. By the time a merger with Cigna is completed, Humana could be completely out of selling employer group commercial medical products.
Due to the opposing directions the two payers have taken, the merger would not only be a hand-in-glove strategic fit by filling the gaps for each side, but it would also make a substantial argument for not infringing anticompetitive practices.
Regulators are more likely to view the deal as a vertical integration than a horizontal one, which increases the likelihood of the merger getting through. Horizontal deals have especially drawn the ire of the Federal Trade Commission (FTC) because of hospitals and payers strengthening their hold in business lines they already command a strong presence.
Cigna and Humana had previously discussed a merger in 2015, but that fell through before the latter reached a deal with Aetna that was blocked for violating antitrust laws. Cigna then agreed to a deal with Anthem, now known as Elevance Health, which also died due to an antirust ruling.
Aetna was later acquired by CVS Health in 2018 and allowed to pass because it was also considered more vertical. Cigna and Humana will hope that their deal will be seen in a similar vein.
Where the deal can be seen as causing antitrust issues is on the PBM side, where Cigna is one of the biggest players in the industry due to its ownerships of Express Scripts, which it acquired in 2018. Folding in Humana's pharmacy assets would give the combination an even greater market share and PBMs are already heavily scrutinized by regulators.
With regulators seemingly looking for any and every reason to put mergers and acquisitions in the healthcare space under the microscope right now, the PBM aspect of the deal may be the reason it falls apart.
If the deal passes, Cigna CEO David Cordani could be at the helm of the merging companies with Humana in the middle of a succession plan that will see Jim Rechtin take the reins from Bruce Broussard in the latter half of 2024.
The health system has reduced its number of full-time equivalents (FTEs) by not filling vacant positions, its CEO shared.
Baxter Health CEO Ron Peterson revealed that the Mountain Home, Arkansas-based health system is leaning into employee attrition to mitigate costs related to workforce.
There are advantages and disadvantages to utilizing attrition, which is why hospital CEOs must be careful how they do it, be transparent with their approach, and have a keen understanding of their employees to forecast how it will affect their workforce.
In an interview with local radio station KTLO, Peterson dispelled rumors of massive layoffs at Baxter Health and shared how it is using attrition to its advantage to remain financially viable as a rural system.
"We have been working very hard on trying to reduce our costs," Peterson said. "We've been looking since about July to try to reduce the number of FTEs, or the number of people working at the hospital. We've been able to eliminate through attrition, which means basically as somebody quits their employment at the hospital for whatever reason, if they retire, if they get a new job, then we don't refill those positions."
According to Peterson, Baxter Health has been able to not refill 155 of those vacant positions, contributing to less reliance on FTEs.
However, that strategy has created a need for Baxter Health to shift some employees around into new roles.
"Now what we're getting into is we need to restructure and reorganize, so we're asking some employees to not continue in their current position but to look at the positions that are open in the hospital and take something that they're qualified for in a different department or different area of the hospital," he said.
"It causes a little tension because employees are saying 'Oh, I don't have my job.' Really, we've notified those people and it's affected about nine people in the organization."
This approach to workforce challenges requires a buy-in and willingness from employees to not only fill different roles as needed, but potentially pick up additional responsibilities that would usually be reserved for those positions that are going unfilled. With burnout already being rampant in healthcare, putting more on the plate of your employees can quickly backfire.
Peterson said that the employees that have transfered to new roles have kept their seniority and benefits though, which could help Baxter Health retain those workers beyond the immediate future.
"We just find that our strength is in our people," he said. "We don't want to just lay people off, that's not our goal. We want to try to keep as many people as we can. That's why we're going through the process that we're going through the process we're going through versus a massive layoff."
Despite facing financial difficulties, Peterson stated Baxter Health has no interest in selling the hospital and wants to remain independent.
Making attrition work in its favor may allow Baxter Health to keep its doors open for now, but CEOs should be careful of delving into 'quiet cutting' territory. This is where transparency is vital and will be beneficial long term, even if making employees aware of your intentions means you will lose some in the process.
Advocate Health's chief medical officer shares what mindset to have in negotiations with payers.
Once you, as a provider, have made the decision to break free from the fee-for-service model to embrace value-based care, the challenge ahead is ensuring a contract that works for you.
Putting that contract in place requires a deft understanding of both what your organization needs and what the payer you're negotiating with requires. It can be delicate dance, but with the right approach and goals in mind, you can establish a sustainable value-based care model that offers better outcomes for you and your patients, says Advocate Health chief medical officer Gary Stuck.
Stuck recently joined the HealthLeaders Podcastand offered his advice to providers hoping to negotiate a value-based contract with a payer.
Here are three tips Stuck mentions to follow in negotiations:
Work together
There's often an adversarial relationship between payers and providers that can pull the parties in opposite directions, but value-based contracts will likely only succeed if both sides are getting what they want.
"The negotiation has to be a win-win because the next year it's not going to be sustainable if both parties don't succeed," Stuck says. "So it has to be a winner for the payer and a winner for the provider. Keeping that in mind, putting that on the table, being transparent about that, and then monitoring that, that's going to create year-over-year success to build on."
Assess
Secondly, evaluate your organization and know its limits. The contract has to be the right fit, not just aspirational.
"The other piece for a provider to look at is what current capabilities will drive success," Stuck says. "Is there something built into the incentive model that you're not going to be able to build quickly, or that you already have, in year one or year two? If so, you're going to be in trouble."
Prioritize
Speaking of aspirations, don't try to do everything in one contract. By narrowing your attention on key areas, you will have an opportunity to build off early success.
"Look within your own capabilities or what you could build in an efficient fashion to drive success and then just pick one, two, or three areas of focus because you can't change everything in your health system, or in your network, in a year," Stuck says.
An example Stuck highlights is Advocate Health focusing on reducing unnecessary skilled nursing facility admissions to cut down on long or unnecessary stiff stays, which he says patients and families didn't want.
"Just pick one or two of those areas of focus early on and do them really well, go deep, invest in those areas, knock it out, and have an early win."
